The trade war between the United States and China shakes Tech stocks as Beijing targets the supply chain

The link in the weakest supply chain?

US technology stocks could be among the most vulnerable to downside risk if President Donald Trump continued his threat of imposing duties of $ 200 billion on products made in China and Beijing authorities restrictions. "

The Wall Street Journal reported that the Trump Administration is ready to apply the 10% duty today, bringing the total amount of goods subject to the new US levies to $ 250 billion, with an additional $ 267 billion as Trump warned, China decides to retaliate.

Chinese officials, in fact, said they would, the US government has written that the country "hoped a counterattack more beautiful and continue to increase the pain felt in the United States."

China imports about US $ 130 billion worth of US-made goods every year, which means that any attempt to match Trump's new tariff plan would be quickly out of date, allowing Beijing to change its industrial policy – in the second largest economy. World.

US technology stocks may already be experiencing some of this discomfort: the S & P 500 Information Technology Index is down 1.15% so far this month, while Philadelphia SE Semiconductor Index, a modest gain of 0.11% for the S & P 500 .

Technology stocks were also the weakest in Europe today, with the sector declining 0.39%, continuing its monthly decline after 5%.

Earlier this month, CEOs of some of the largest US technology companies, including Cisco Systems (CSCO), Dell Technologies (DELL), and Hewlett Packard Enterprises (HPE), urged US sales representative Robert Lighthizer to reconsider pricing up to 25% on goods from China, arguing that this decision "would cause disproportionate economic harm to US interests, including our US companies and workers, our customers, US consumers, and economic and strategic priorities". broader "investments for the deployment of 5-G networks and advances in cloud computing.

"In addition to giving us less capital to invest in research and development, the reduced benefits that these fees could bring could result in hiring freezes, stagnant wages and even job losses, as well as reduced dividends. and erosion of shareholder value, "said the companies.

In fact, a recent Morgan Stanley research note estimated that escalating tariffs to a higher level would have an increasingly large impact on global supply chains as opposed to growth. direct economic, and that the stock market models of higher prices, recruitment reductions and a slowdown in household consumption.

"In other words, the associated impact will not remain focused on national players in the economy, but will extend much further than the territorial constraints imposed by the trade barrier," said Chetan Ahya, economic manager of Morgan Stanley.

US technology companies, including Action Alerts Plus, which has sold more iPhones in the United States than in the past three years and generated 20% of its annual revenues of nearly $ 200 billion, have important links with mainland China and Taiwan.

China's inclusion in the global supply chain has not been an accident, according to a study by the US-China Economic and Security Review Commission released earlier this year.

The Chinese government views the ICT sector as a "strategic sector" in which it has invested significant capital and influence on behalf of state-owned enterprises (information and communications technologies) and its influence is strong. has been significantly increased over the last 20 years.

In 1997, for example, computers and telecommunications equipment, electrical equipment and related machinery imports from China accounted for about one-third of the total. Last year, this same product group accounted for 54% of the US $ 375 billion trade deficit.

The study found that seven major US technology companies – Hewlett Packard (HP), IBM (IBM), Dell Inc., Cisco Systems, Unisys Corp. (UIS), Microsoft Corp. (MSFT) and Intel Inc. (INTC) more than half of their products and components from China.

"The US Government Needs a National Strategy for Supply Chain Risk Management for Vulnerabilities in the US Commercial Supply Chain, Including China-Related Procurement," the report says .

"This strategy must include supportive policies to ensure that the US security posture is forward-thinking rather than reactive and based on addressing vulnerabilities, violations and other incidents that have already affected national security, economic competitiveness or to the privacy of American citizens. "